The business behind the show

Fireworks expected at News Corp. annual meeting

October 20, 2011 | 6:03
pm

Better to face angry shareholders on a full stomach.

News Corp. Chairman and Chief Executive Rupert Murdoch chowed down with sons Lachlan and James on the Fox lot Thursday afternoon, less than 24 hours before the company's much-anticipated annual meeting.

Friday will mark the first time since the phone hacking scandal at the now-shuttered News of the World British tabloid turned into a global story that Murdoch has addressed shareholders. Two influential shareholder advisory firms and the nation's largest pension fund, CalPERS, are pushing to remove Murdoch and his sons from the company's board.

Although News Corp. had revenues of more than $33 billion for its fiscal year ending last June, most of the focus of the meeting will likely be on how the company has handled the News of the World mess.

The scandal, in which News of the World operatives hacked into voice mail accounts of celebrities, members of the British royal family and even crime victims, has had massive repercussions for the company. Not only did top executives Les Hinton and Rebekah Brooks resign from their senior positions at News Corp. because of their roles in the News of the World fiasco, but also a long-planned $12-billion deal to acquire the 60% of BSkyB it didn't already own was scuttled and lawmakers in Britain and the U.S. have launched investigations into the company.

"I don’t think investors have been given the full picture," said Tom Watson, a key member of Parliament's Culture, Media and Sport Committee, which has been leading the investigation into News Corp. Watson, who acquired shares in News Corp. from the AFL-CIO and flew from London to attend the meeting, said, "This isn’t just about phone hacking, this company is facing criminal charges for bribing police officers, and potentially their executives will be charged with perjury."

News Corp.'s board of directors in particular has come under attack by some, accused of being little more than a rubber stamp for the Murdochs.

"Do the directors really know what's going on there? Do they have a handle on the culture of the company?" asked Anne Sheehan, director of corporate governance for the California State Teachers Retirement System, which withheld its votes to reelect the Murdochs and the rest of the News Corp. board.

With Murdoch controlling about 40% of the company's voting stock and another 7% held by Saudi investor and Murdoch ally Prince Alwaleed bin Talal, the odds are long that the growing number of disgruntled shareholders have the strength to topple the mogul.

But they can send a message about his stewardship and who he plans on having succeed him at the helm.

“For shareholders, this is a blessing in disguise,” said Kevin Holt, a senior portfolio manager for Invesco Ltd., one of the largest institutional shareholders in News Corp.

Because James Murdoch had been overseeing the News of the World as part of his job as head of European operations, he in particular has been under the microscope. Currently the third-highest-ranking executive at the company and until recently seen as the heir apparent to the top spot, now some are questioning his handling of the crisis and whether he is the right choice to succeed his father.

Holt’s preference would be for Chase Carey, a longtime top lieutenant to Rupert Murdoch and currently the company’s deputy chairman, to take on more responsibility.

“If Rupert decides to step away from the CEO job, the most qualified person to be CEO without question is Chase Carey,” Holt said, adding that he’d also like News Corp.’s board of directors to be “more independent.”

News Corp. has given no sign that it has any intention of restructuring its board of directors. Last week, in reaction to a recommendation from advisory firm Institutional Shareholders Services that the Murdochs be voted off the board, the company said the "disproportionate focus on these issues is misguided and a disservice to our stockholders."

The heat the company will be facing Friday won't be limited to the Zanuck Theater on the Fox lot where the annual meeting is being held. The Los Angeles version of Occupy Wall Street has also expressed its intent to protest at the meeting.

One word of warning to the protesters. Don't try to go after Murdoch with a pie. His wife, Wendi Deng, packs a mean punch.